Bonds are partying like it's 2007 🚨

Welcome back to the Day Trading newsletter 📈

Stocks slipped Monday (the S&P 500 fell 0.5% to 7,745.06) as oil pushed higher and the bond market sent a signal it hasn't sent in 19 years. That's where we're starting today.

Let’s get into it 👇️ 

💰️ Stripe agreed to buy AI startup OpenRouter for more than $7 billion. OpenRouter runs a marketplace that lets developers switch among 400+ AI models from OpenAI, Anthropic, Google, and others. The price is more than 5x the $1.3 billion valuation OpenRouter fetched in its May funding round.

🧑‍⚖️ Meta's landmark youth-safety trial opens in Oakland federal court Tuesday, with damages the company's own lawyers say could theoretically reach $1.4 trillion. Four states, arguing for a 29-state coalition, claim Meta knowingly built addictive features that harmed kids and collected data on children under 13. States' lawyers call roughly $200 billion more realistic. Shares fell about 3.5% Monday.

📈 Anthropic's revenue reportedly topped $11.5 billion in the second quarter, up at least 14-fold from a year earlier, and chip stocks rallied on the news. The report reinforced bets that the AI datacenter buildout has years to run — and deepened Monday's rotation out of software stocks, with Microsoft sliding 3%.

🧠 Memory-chip stocks surged after Commerce Secretary Howard Lutnick said the administration is "not in favor" of Apple buying memory chips from Chinese suppliers. Sandisk ripped as much as 10% and Micron rose about 6%. Keeping Apple's massive orders with US and Korean suppliers tightens an already historic memory shortage.

🔻 Nike fell 4% Monday to $39.09, its lowest close since September 2014. Rival On Holding's sales miss and soft guidance dragged the sneaker space lower, piling onto Nike's existing problems: rising competition from On and Hoka, weak China demand, and a stock already down almost 39% this year.

🛢️ Brent crude climbed to about $89 a barrel Monday as US-Iran diplomacy hit a stalemate and the two sides' 60-day ceasefire expired. Both benchmarks gained more than 5% last week after attacks on ADNOC tankers and a Saudi Aramco refinery. Every dollar of crude feeds into the inflation problem the bond market is pricing.

🏭️ New York factory activity hit a more-than-four-year high in August, with the Empire State index reaching 20.6 versus the consensus for 12. Unfilled orders jumped 10 points, though new orders cooled slightly from July. It's a striking contrast with the consumer side of the economy, where retail sales and sentiment are flashing yellow.

🤝 Alibaba is set to sell its game developer Lingxi Games to private equity firm Trustar Capital in a deal worth more than $2 billion, Reuters reported. Shares rose 1.5% in premarket trading Monday on the news, as the company continues shedding non-core businesses to focus on its AI and cloud push.

The 30-year Treasury yield topped 5.31% on Monday, its highest level since 2007 back when the financial crisis was just getting started and that year's peak hit 5.44%.

The move caps a brutal stretch for the long end of the bond market: last week the Treasury had to pay 5.216% to sell $25 billion of new 30-year bonds, the highest yield at such an auction since 2001, and a 10-year auction a day earlier drew the highest financing cost since 2007.

When bond investors demand more yield, they're demanding more compensation for risk.

Right now they're worried about three things:

1. Washington's surging debt load and the flood of new bonds needed to fund it

2. Inflation that has sat above the Fed's 2% target for five straight years (July CPI ran 3.4%), and

3. A new wave of corporate borrowing to bankroll the AI buildout competing for the same investor dollars.

The strange part is that this is happening while the economy softens.

Employers unexpectedly cut jobs in July, retail sales just posted their biggest drop in over a year, and short-term rates have actually fallen (the 2-year yield is down 12 basis points this month while the 30-year is up more than 13).

That widening gap (a "steepening yield curve," in bond-speak) means the market's worry is shifting away from the Fed and toward the deficit itself. And the 30-year yield is the anchor for mortgage rates and long-term borrowing costs, so this selloff filters straight into the real economy.

What to watch: 

• Wednesday's FOMC minutes from the July meeting, where three officials dissented in favor of a rate hike.

• Barclays' head of US rates strategy Anshul Pradhan says his team keeps "arguing against fading the long end sell-off.” Translation: don't bet on yields falling soon (unless Washington delivers a fiscal surprise or the AI borrowing binge slows).

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⚠️ Disclaimer: Not financial advice. Do your research before making any trades.